Why Can't the US Print all the Money it Needs?

Revoltingest · Nov 2, 2020

Nakosis said:
And isn't increasing the minimum wage just another way of injecting more printed money into the system?

No, cuz it doesn't affect the number of dollars in circulation.
It just causes the relationship between employer & employee
to change. How it changes would vary with the level of minimum
wage, the industry, & adjustment time.

Brickjectivity · Nov 2, 2020

Nakosis said:
So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

Our country does inflate currency sometimes. However it is called quantitative easing, now. The boomer generation of Americans experimented with inflation, because Economists temporarily got the impression that inflation was directly related to employment, and employment is the greatest reducer of poverty. Therefore they inflated like crazy and found out that model was wrong. Since then better models using more data have been constructed. Try the IS/LM model. Its not accurate but helps explain the general direction that things go when you change something about your economy, such as increasing your money supply. It is difficult to read, because it looks like a chart but isn't a chart, but unlike when I was in school its now freely explained on youtube.

To read the IS/LM model (which teaches intuition about the economy), you have to think of it not as a chart but as a cycle that represents a number of years. The lines are not graphs but are indicators of direction. It is set up as a typical 2D chart with interest on the vertical and gross domestic product on the horizontal. Emblazoned in the chart area is an X of two lines, one sloping down-right (the Interest and Savings combo line) and one sloping up to the right (the ratio of money supply to overall value for the currency). Each of the four items actually has a formula which is derived from observing markets over the year and using sense, too; but there are no numbers on it. The way to use the chart is to create a market disturbance by changing (in your head) the value of any thing represented in the chart: income, interest, GDP etc. Then you imagine what this does to the lines and formulas: Change of slope, moving right or left, up or down. Finally imagine what must happen to bring the lines back to equilibrium. That predicts what the economy is likely to do after you make your change but only very roughly. Its a hint not a compass. This is a teaching tool to help develop intuition about economies, but it only considers a small number of variables and does not measure the actual quantities. It leaves much to be desired for anyone who wants to make a convincing pitch to an Economist and is too complicated to explain to most people.

In the IS/LM model if the quantity of money is increasing, you need the interest rates to drop in order to maintain equilibrium -- which is the ideal. Equilibrium means the economy continues steadily growing, no surprises. Its a unicorn fantasy, but its what you want in this model. Sometimes the government tries to 'Ease' the effect of inflation by lowering interest rates. You'll hear about the Fed doing this, sometimes; but what happens when interest rates are already low? If they're desperate they'll offer the banks a negative interest rate! Yes, they have done this. Then when they feel the time is right they'll raise interest rates again, so that next time inflation hits they can re-lower them. Sometimes it works.

Stevicus · Nov 2, 2020

Nakosis said:
So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

As far as ending poverty, I don't see it as a matter of money, but a matter of goods and services. The best way to help the poor without raising taxes, wages, or benefits is to keep prices and rents under control. By lowering the costs of housing, food, healthcare, utilities, transportation, and other essential goods and services, having less money won't sting quite so much - and it wouldn't require higher taxes, raising the minimum wage, or increasing benefits to the poor.

TransmutingSoul · Nov 2, 2020

Nakosis said:
I guess the evil boogieman here is inflation.

Here's a response I found an economics professor.

Let me try to remove some of the confusion. Imagine the only good in the economy is corn and corn costs $1 a pound, and imagine you and all others earn $100 a month. Each month you buy 100 lbs of corn exchanging $1 for 1 lb of corn; so the real value of $1 is 1 lb of corn. Now suppose the government simply prints more dollar bills and gives you (and imagine everyone else) an additional hundred dollars. If you want to eat more than 100 lbs of corn a month, now you can do so but presumably, since others like you also want to do the same, the demand for corn in the economy would go up and very likely its price as well. Now you would have to give up, say $1.50 for each lb of corn. This, roughly speaking, is inflation, and it is eroding the real value of your dollars -- you are getting less corn for every dollar than you used to.
You ask, won't firms rush to meet this extra demand caused by everyone having an extra hundred dollars? Yes, they would but they'd have to hire people to work in the farms and the higher demand for workers would likely raise their wage. Also, workers will see the inflation around them and want higher dollar wages so they can continue to buy as much corn as before. In short, wages in real terms would rise and this would erode profits and as such, farms will not hire as many workers as you'd think. So yes, there can be a short-lived stimulative effect of printing money.
Bottom line is, no government can print money to get out of a recession or downturn. The deeper reason for this is that money is really a facilitator of exchange between people, a middleman in a trade. If goods could trade with goods directly, without a middleman, we would not need money. If you print more money you simply affect the terms of trade between money and goods, nothing else. What used to cost $1 now costs $10, that's all, nothing fundamental or real has changed. It is as if someone overnight added a zero to every dollar bill; that per se, changes nothing. Just as giving every student 10 extra points on a test changes nothing fundamentally.
Why can't we just print more money, since it really isn't representative of anything of value? | Department of Economics

So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

If you have not yet watched this, this is good.

Regards Tony

MNoBody · Nov 2, 2020

all the "money" of that species is debt, would not exist without debt...the more debt, the more money, by the fed's own admission.

Heyo · Nov 3, 2020

Nakosis said:
So increasing the minimum wage, leads to inflation.

Nope. It doesn't add money, it just adjusts the value of a property.

A stimulus package leads to inflation.

Nope, at least not directly. The package has to be paid with tax dollars which will lead to the need to raise taxes. Causing inflation can raise tax revenue without raising the official tax rate.

Printing more money leads to inflation.

Yep. But that is not the only way. Money today is mostly virtual, it only exists as ones and zeros in a banks computer. Banks can and do create money from nothing (Fiat money - Wikipedia).
The value of money is the price you are willing to get it. With low interest rates the value of money is low.
But isn't valueless money a sign of inflation?
Technically, yes, but when a big part of the money isn't in circulation with real values, it doesn't lead to hyperinflation. And a big proportion of the dollar is only circulated in the casino capitalism of the derivative market.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Correct.

Do you agree or disagree?

If you agree, what is the answer to poverty?

You can't fight poverty by printing new money. But there is enough money around, you just have to take it from those who have too much of it.

Shadow Wolf · Nov 3, 2020

Nakosis said:
So increasing the minimum wage, leads to inflation.

We just debated this. It doesn't. It's even been found to slightly lower prices in some instances.

Shadow Wolf · Nov 3, 2020

Stevicus said:
As far as ending poverty, I don't see it as a matter of money, but a matter of goods and services. The best way to help the poor without raising taxes, wages, or benefits is to keep prices and rents under control. By lowering the costs of housing, food, healthcare, utilities, transportation, and other essential goods and services, having less money won't sting quite so much - and it wouldn't require higher taxes, raising the minimum wage, or increasing benefits to the poor.

Truly, at the end of the day, I hold the entire field of economics is no better than astrology or phrenology. It's like the earliest days of anthropology and psychology, when things began with an assumption to fit proper British, Victorian, whatever standards and expectations. They read their signs, put their assumptions into it, and go from there. It's basically the same. An occult system of charts and numbers that are explainable, but just don't hold up well to scrutiny. And it just doesn't seem that accurate in the end.
Probably why so many--such as Alan Greenspan--have come to the conclusion they are wrong. Because it's really nothing more than smoke and mirrors in the end. A symbol given power by the masses.

Estro Felino · Nov 3, 2020

Because certain greedy élites would gain less from Seigniorage Banking.

Just in case, look at this: the Banks that own the FED

Only a person, a hero called John Fitzgerald Kennedy tried to defy this system.
But he and his brother were killed...what a coincidence.

Estro Felino · Nov 3, 2020

Those who say that more printed money causes inflation, are obviously wrong. Because the demand of money is controlled by the State and kept in balance through the interest rates and taxes.

Besides, taxes can increase, but through taxes you can get single payer universal healthcare, affordable university, free education.

Estro Felino · Nov 3, 2020

I would like someone to define me what Seigniorage Banking is.
Once I get the juridic-economic definition, people can speak of inflation and interest rates.

Shadow Wolf · Nov 3, 2020

Estro Felino said:
New Those who say that more printed money causes inflation, are obviously wrong. Because the demand of money is controlled by the State and kept in balance through the interest rates and taxes.

Then what happen in post-WWI Germany?

Estro Felino · Nov 3, 2020

Shadow Wolf said:
Then what happen in post-WWI Germany?

It happened that you cannot print money without GDP.
The GDP of the Weimarer Republik was below the line...in all senses..so printed money was worth nothing.

But USA's GDP is really big

FearGod · Nov 3, 2020

Nakosis said:
I guess the evil boogieman here is inflation.

Here's a response I found an economics professor.

Let me try to remove some of the confusion. Imagine the only good in the economy is corn and corn costs $1 a pound, and imagine you and all others earn $100 a month. Each month you buy 100 lbs of corn exchanging $1 for 1 lb of corn; so the real value of $1 is 1 lb of corn. Now suppose the government simply prints more dollar bills and gives you (and imagine everyone else) an additional hundred dollars. If you want to eat more than 100 lbs of corn a month, now you can do so but presumably, since others like you also want to do the same, the demand for corn in the economy would go up and very likely its price as well. Now you would have to give up, say $1.50 for each lb of corn. This, roughly speaking, is inflation, and it is eroding the real value of your dollars -- you are getting less corn for every dollar than you used to.
You ask, won't firms rush to meet this extra demand caused by everyone having an extra hundred dollars? Yes, they would but they'd have to hire people to work in the farms and the higher demand for workers would likely raise their wage. Also, workers will see the inflation around them and want higher dollar wages so they can continue to buy as much corn as before. In short, wages in real terms would rise and this would erode profits and as such, farms will not hire as many workers as you'd think. So yes, there can be a short-lived stimulative effect of printing money.
Bottom line is, no government can print money to get out of a recession or downturn. The deeper reason for this is that money is really a facilitator of exchange between people, a middleman in a trade. If goods could trade with goods directly, without a middleman, we would not need money. If you print more money you simply affect the terms of trade between money and goods, nothing else. What used to cost $1 now costs $10, that's all, nothing fundamental or real has changed. It is as if someone overnight added a zero to every dollar bill; that per se, changes nothing. Just as giving every student 10 extra points on a test changes nothing fundamentally.
Why can't we just print more money, since it really isn't representative of anything of value? | Department of Economics

So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

I believe the solution for poverty is to let the rich a less richer and the poor a less poorer
and that is by giving workers and employers a better wages.

Heyo · Nov 3, 2020

Shadow Wolf said:
Truly, at the end of the day, I hold the entire field of economics is no better than astrology or phrenology. It's like the earliest days of anthropology and psychology, when things began with an assumption to fit proper British, Victorian, whatever standards and expectations. They read their signs, put their assumptions into it, and go from there. It's basically the same. An occult system of charts and numbers that are explainable, but just don't hold up well to scrutiny. And it just doesn't seem that accurate in the end.
Probably why so many--such as Alan Greenspan--have come to the conclusion they are wrong. Because it's really nothing more than smoke and mirrors in the end. A symbol given power by the masses.

I think economy is more like meteorology than astrology. There are real phenomena and we can work out causal chains but the system itself is chaotic so that predictions are near impossible.

9-10ths_Penguin · Nov 3, 2020

Nakosis said:
I guess the evil boogieman here is inflation.

Here's a response I found an economics professor.

Let me try to remove some of the confusion. Imagine the only good in the economy is corn and corn costs $1 a pound, and imagine you and all others earn $100 a month. Each month you buy 100 lbs of corn exchanging $1 for 1 lb of corn; so the real value of $1 is 1 lb of corn. Now suppose the government simply prints more dollar bills and gives you (and imagine everyone else) an additional hundred dollars. If you want to eat more than 100 lbs of corn a month, now you can do so but presumably, since others like you also want to do the same, the demand for corn in the economy would go up and very likely its price as well. Now you would have to give up, say $1.50 for each lb of corn. This, roughly speaking, is inflation, and it is eroding the real value of your dollars -- you are getting less corn for every dollar than you used to.
You ask, won't firms rush to meet this extra demand caused by everyone having an extra hundred dollars? Yes, they would but they'd have to hire people to work in the farms and the higher demand for workers would likely raise their wage. Also, workers will see the inflation around them and want higher dollar wages so they can continue to buy as much corn as before. In short, wages in real terms would rise and this would erode profits and as such, farms will not hire as many workers as you'd think. So yes, there can be a short-lived stimulative effect of printing money.
Bottom line is, no government can print money to get out of a recession or downturn. The deeper reason for this is that money is really a facilitator of exchange between people, a middleman in a trade. If goods could trade with goods directly, without a middleman, we would not need money. If you print more money you simply affect the terms of trade between money and goods, nothing else. What used to cost $1 now costs $10, that's all, nothing fundamental or real has changed. It is as if someone overnight added a zero to every dollar bill; that per se, changes nothing. Just as giving every student 10 extra points on a test changes nothing fundamentally.
Why can't we just print more money, since it really isn't representative of anything of value? | Department of Economics

So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

What you posted said nothing about the minimum wage; other issues are at play there.

And it's not just governments who "create" money to put it into the system. A lot comes from private banks, who are allowed to loan out many times more than they actually have in reserves:

Reserve Requirements History
The practice of holding reserves started with the first commercial banks during the early 19th century. Each bank had its own note that was only used within its geographic area of operation. Exchanging it to another bank note in a different region was expensive and risky because of lack of information about funds at the other bank. To overcome this problem, banks in New York and New Jersey arranged for voluntary redemption at each other's branches on condition that the issuing bank and redeeming bank both maintained an agreed upon deposit of gold or its equivalent. Subsequently, the National Bank Act of 1863 imposed 25 percent reserve requirements for banks under its charge. Those requirements and a tax on state bank notes in 1865 ensured that national bank notes replaced other currencies as a medium of exchange. Creation of the Federal Reserve and its constituent banks in 1913 as a lender of last resort further eliminated risks and costs required in maintaining reserves and pared down reserve requirements from their earlier high levels. For example, reserve requirements for three types of banks under the Federal Reserve were set at 13 percent, 10 percent, and 7 percent in 1917.

In response to the COVID-19 pandemic, the Federal Reserve reduced the reserve requirement ratio to zero across all deposit tiers, effective March 26, 2020. This aim of this reduction was to jump-start the economy by allowing banks to use additional liquidity to lend to individuals and businesses.

Reserve Requirements

... so "not printing all the money we want" would mean severely tightening up the regulations on the finance industry.

Estro Felino · Nov 3, 2020

9-10ths_Penguin said:
And it's not just governments who "create" money to put it into the system. A lot comes from private banks, who are allowed to loan out many times more than they actually have in reserves:
.

Yes...and this is called Seigniorage Banking.
And it is unjust.
It is a huge absolute power that makes governments irrelevant.

Stevicus · Nov 3, 2020

Shadow Wolf said:
Truly, at the end of the day, I hold the entire field of economics is no better than astrology or phrenology. It's like the earliest days of anthropology and psychology, when things began with an assumption to fit proper British, Victorian, whatever standards and expectations. They read their signs, put their assumptions into it, and go from there. It's basically the same. An occult system of charts and numbers that are explainable, but just don't hold up well to scrutiny. And it just doesn't seem that accurate in the end.
Probably why so many--such as Alan Greenspan--have come to the conclusion they are wrong. Because it's really nothing more than smoke and mirrors in the end. A symbol given power by the masses.

Economics is a social science, just like philosophy, history, or political science. It has some scholarly value, but in my observation, the problems come in when capitalist fanatics argue with the implication that economics is an exact science. Greenspan finally admitted they were wrong decades after he and other Reaganites allowed a great deal of damage to occur.

Stevicus · Nov 3, 2020

Heyo said:
I think economy is more like meteorology than astrology. There are real phenomena and we can work out causal chains but the system itself is chaotic so that predictions are near impossible.

I would compare it more to political science than a hard science like meteorology. It's a social science and very political.

Estro Felino · Nov 3, 2020

Stevicus said:
I would compare it more to political science than a hard science like meteorology. It's a social science and very political.

Actually welfare economics is very apolitical and its aim is to satisfy the needs of all macroeconomical agents. From the poorest one to the richest one, to create the so called "Pareto efficiency"
Welfare economics - Wikipedia

As a very brave Italian economist says, Ilaria Bifarini we have been witnessing the destruction of welfare economics by people like Friedrich Hayek and the Austrian School, who fraudulently favors the most powerful élites.
She has written many books criticizing the € too.

She admires Joseph Stiglitz

Why Can't the US Print all the Money it Needs?

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